I’ve been thinking about the housing market a lot lately. Moreover, I’m buying housing stocks because of several developments, writes Steve Strazza, chief market strategist at AllStarCharts.
Rose and I have decided to give the mainland a shot and are moving up to the Naples area this week. We’ll miss Key West, but we are excited about this new chapter in our lives.
Housing is one of the most interest rate-sensitive groups in the entire market, so my positive view has everything to do with bonds. The list of intermarket evidence supporting lower rates continues to grow by the day.
I wrote about the new highs for speculative growth stocks a few days ago. I don’t think that trend reversal sticks without lower rates. So, as long as it does, it tells me the market is expecting rates to fall. Other rate-sensitive groups like banks and biotechs are trending well, too.
Meanwhile, here’s a look at the SDPR Homebuilders ETF (XHB) sporting a potential bullish momentum divergence in the lower pane:
As for the price chart, we have a VWAP pinch pattern playing out with XHB coiling at a critical polarity zone. 100 is technically the confirmation level, but let's keep it simple — I like round numbers. If XHB is above 100, look out for the homies. They aren’t dead yet.
In fact, I think buying this coil and betting on a failed top is one of the best trades on the sheets right now.
Recommended Action: Buy XHB.
